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June 19, 2000


The opinion of the court was delivered by: Larimer, Chief Judge.


Plaintiffs commenced this action under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., seeking to recover certain retirement benefits allegedly due them under the Akzo Nobel Retirement Account Plan ("the Plan"). The original complaint contained six causes of action: two under ERISA; three state-law claims for breach of contract, fraud, and conspiracy to defraud; and a claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq.

Defendants, Akzo Nobel, Inc. ("Akzo"), the Plan, by its representative, Akzo Nobel Retirement Account Plan Pension Committee ("the Committee"),*fn1 and Cargill, Inc., have moved to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. In addition to responding to those motions, plaintiffs also filed an amended complaint. That complaint dropped the fraud, conspiracy, and RICO claims. Plaintiffs state that the amended complaint also "clarif[ies] their ERISA and contract claims. . . ." Plaintiffs' Memorandum of Law at 2. Defendants have filed reply briefs addressing these remaining claims.


The five plaintiffs in this action were all employees of Akzo at its facility in Watkins Glen, New York as of April 1997, and were fully vested members of the Plan. The Plan contained an early-retirement provision giving participants the option of retiring (albeit with reduced benefits) as early as age 55. Plaintiffs were all within two years of reaching age 55 in April 1997.

In December 1996, Akzo entered into a purchase agreement with Cargill, pursuant to which Cargill would acquire most of Akzo's salt-producing business by April 1997, including the Watkins Glen facility. The agreement also provided that Akzo would "retain the assets, sponsorship, administration of and liability for all benefit obligations pursuant to its benefit plans," and that Akzo would "fulfill its obligations in accordance with [its] pension plans without regard to whether or not an eligible retiree is employed by Cargill." Amended Complaint Ex. A. The agreement stated, "It is expressly understood and agreed that Cargill is not assuming any obligations or liabilities under [Akzo's] benefit plans." Id.

The purchase agreement further provided that Akzo was to provide Cargill with a list of all its active employees, and that prior to the closing, Cargill would identify those employees whom it was not going to retain. Cargill promised, however, "to employ substantially all" of the remaining employees, and "to maintain substantially the same base salary levels and fringe benefit structure (on an aggregate basis) for Transferred Employees initially." Id. The agreement also stated that "[a]s to those employees . . . to whom Cargill offers a substantially different job or location and such offer is refused, Cargill will promptly pay to [Akzo] the severance payments which would be made by [Akzo] to such employees in the event of their termination as of the Closing in accordance with [Akzo's] standard severance practice." Id.

Akzo transferred the Watkins Glen and other salt-producing facilities to Cargill on April 25, 1997. None of the plaintiffs had been selected by Cargill for termination prior to the transfer. Under the terms of the purchase agreement, plaintiffs at that point ceased being Akzo employees, and became employees of Cargill instead. The complaint alleges that although plaintiffs initially were kept on as Cargill employees, Cargill terminated all of them within six months of the sale.

The amended complaint asserts three causes of action. The first, which is brought under 29 U.S.C. § 1140 against the Akzo defendants, alleges that prior to the execution of the purchase agreement, Akzo and Cargill represented to plaintiffs that they would suffer no substantial reduction in benefits as a result of the sale of the Watkins Glen facility to Cargill. Plaintiffs also allege that Akzo promised them that, as employees within two years of early retirement age, they would be "bridged" to age 55. In other words, Akzo promised plaintiffs that their right to claim full early retirement benefits would not be affected by the sale to Cargill.

Under the terms of the Plan, any employee age 55 or older could claim early retirement benefits. The employee's pension benefit would be reduced by .5% for each month by which the commencement date of the pension preceded the employee's 62nd birthday. Affidavit of A. James Edwards (Docket Item 16) Ex. O, § 4.03(b). The Plan also provides that if a vested Plan member's employment were terminated for any reason other than retirement or death, the member would be eligible for a pension upon reaching his normal retirement date (in most cases, age 65). Id. § 4.05(b)(i). The Plan states that

(ii) Notwithstanding the foregoing, a Member's employment shall not be deemed terminated . . . if (A) the Member's business unit, group or division is sold; and (B) the Member accepts employment with the purchaser or an affiliate of purchaser; and (C) assets from the Trust Fund attributable to the Member are transferred to a qualified retirement plan maintained by purchaser or an affiliate of purchaser.

Id. § 4.05(b)(ii).

Section 4.05(c) provides that a terminated Plan member may also

elect . . . to have his Pension begin as of the first day of any month following his 55th birthday and prior to his Normal Retirement Date. In such event, the Member's Pension shall be reduced by one-half of one percent (0.5%) for each full month by which the Benefit Commencement Date precedes the Member's Normal Retirement Date.


The complaint alleges that the Akzo defendants have treated plaintiffs as having been terminated by Akzo as of April 25, 1997, and has reduced their benefits with reference to the dates of their 65th birthdays under § 4.05(c), rather than with reference to the dates of their 62nd birthdays under § 4.03(b). As a result, plaintiffs allege that they have lost 18% of the value of their pension benefits. Plaintiffs allege that similarly-situated employees at other Akzo ...

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